The Government of the Republic of Zambia has signalled commitment to reviving the mining industry and targets to increase copper production from 800,696 tonnes in 2021 to 3 million metric tonnes in 2031. The mining industry has reacted positively to these pronouncements, with First Quantum Minerals announcing its intentions to make an investment of $1.25 billion for the expansion of Kansanshi Copper Mine and $100 million to support the production of nickel in Zambia. Not only will this investment increase output from the mining industry, it will also enhance growth of other economic sectors such as transport and logistics and the manufacturing sector through linkages.
The mining sector’s current uptake of locally produced goods however stands at a low of 10% of the $2.38 billion mining procurement budget on goods and services, according to the Accelerated Growth for Micro, Small and Medium Enterprises in Zambia Programme (AGS). The low uptake of local content has been attributed to the underdeveloped linkages between the mining industry and the domestic productive industry, which has inhibited efforts to attain industrial growth. On the contrary, studies have shown how increased procurement of local products by mines trickles down, especially in times of a mining boom, and should be therefore promoted.
In order to encourage mining local content, Part III (20) of the Mines and Minerals Development Act (2015) has provisions that promote the uptake of local content through preferential treatment of Zambian products, contractors, services and employment of locals. Through the Act, institutions with mining rights or mineral processing licences are in their operations of purchasing, construction, installation and decommissioning of facilities expected to give preference to the services, products and materials from locals. The mines are also expected to give preference to Zambian citizens with relevant qualifications and skills in employment.
On the other hand, local companies are subjected to stiff competition from international companies, which in many cases produce commodities more cheaply with higher economies of scale. While local companies are faced with financial constraints, affecting their investments to produce the quantity and quality required by consumers such as the mines. In this regard, large mining companies prefer to procure goods and services from international companies as opposed to local companies, considering the fact that international companies tend to be Original Equipment Manufacturers (OEMs) and provide more attractive sales and after sales services.
Therefore, in order to help increase local content in the mining industry, the industry has implemented several initiatives that include running supplier development programmes, providing support to trades training institutes, and investing in infrastructure and community development programmes. For example, Barrick Lumwana, in collaboration with AGS and the Women’s Entrepreneurial Access Centre (WEAC) recently launched the 10X Business Accelerator Programme in Kalumbila, which aims to build capacity for local contractors in Barrick’s mining supply chain and support their growth plans.
With the investment currently trickling into the mining industry, manufacturers are also positioning themselves for growth by aligning themselves to the opportunities that will arise in the mining industry, especially in procurement. Zambian manufacturers are producing various goods which are consumed in the mines such as nuts and bolts, fabricated metallic components and castings, mill and crusher wear parts to mention a few with the hope of having the mines as a major market.
From a policy and legal front, the continued low uptake of local content by the mining industry has sparked debate on the need to revise the mining local content legislation in order to increase the mines procurement of local goods and services. The Ministry of Mines and Mineral development began the review process with consultations from stakeholders such as manufacturers, which it is yet to concluded. Therefore, there is need for the government to expedite the formation of a legal framework that promotes the uptake of local products and services in the mining industry to safeguard manufacturers and assure their investment. A revised Mines and Minerals Development Act will ensure local manufactures and service providers benefit from the projected copper boom.
The Zambia Association of Manufacturers (ZAM), on the other hand, has initiated a number of projects aimed at enhancing the competitiveness and growth of the manufacturing sector. Notably, in order to encourage procurement of local goods and services, ZAM has partnered with Kansanshi Mining Plc, which grants ZAM members preferential treatment to supply goods and services. Additionally, the Association has hosted a number of trainings and workshops to ensure that the goods and services supplied to the mines are of the highest international standards, quality and are in compliance to Government regulations. Nonetheless, it is cardinal that mining policy fosters linkages to industries such as manufacturing so that as the copper price and production boom, other economic sectors experience growth and development too which trickles down to household level.
